The world potash market is characterized by a limited number of producers where four countries - Canada, Russia, Germany and Belarus - account for three-quarters of global output.
With a tightening supply of potash worldwide projected to remain tight for the next five years, and as fertiliser sales soar in step with biofuel production, the multinational mining and resources group Rio Tinto (RTP), wants to grab 10% of the world potash market notes Daily Telegraph - according to Preston Chiaro, chief executive of Rio’s energy and minerals unit.
Bill Doyle, CEO of Canadian firm Potash Corp., the world’s largest fertilizer producer, told shareholders at the firm’s annual meeting that, “Around the world, potash customers are receiving shipments on an allocation basis, as supply is too tight to provide the full volumes they have requested.”
Global demand for potash stands at around 60m tonnes a year and is growing at about 3% a year. What’s more, fundamentally, the potash market is no longer a market of over-capacity and supply management. The potash industry has changed from being supply managed to demand driven.
All surplus capacity is currently getting absorbed to meet growing demand. The underlying fundamentals for this industry are incredibly strong which is the main driver behind Rio Tinto’s intended involvement in this market.
The push into a new commodity comes as Rio’s board fights a $140bn takeover by rival BHP Billiton (NYSE:BHP).